This discussion paper provides the first estimate of the net effect of
smoking on UK taxpayers per annum. Up until now, estimates have
used a methodology that typically includes intangible costs, including
costs to smokers themselves, while ignoring tangible savings to the
state and tax revenues from tobacco duty.
• We estimate a net saving of £14.7 billon per annum at current rates of
consumption, with the costs smokers incur significantly outweighed by
the sum of tobacco duty paid and old-age expenditures avoided due to
• The government spends £3.6 billion treating smoking-attributable
diseases on the NHS and up to £1 billion collecting cigarette butts
and extinguishing smoking-related house fires. But these costs are
covered more than four times over by early death savings and tobacco
• In the absence of smoking, the government would spend an extra £9.8
billion annually in pension, healthcare and other benefit payments (less
taxes forgone). Duty paid on tobacco products is £9.5 billion a year.
In total, the gross financial benefit to the government from smoking
therefore amounts to £19.3 billion. Subtracting the £4.6 billion of costs
(above) produces an overall net benefit of £14.7 billion per annum.